Rolls Royce Share price closed trading on Monday on an anticlimax, going down by 0.83%. However, it bounced back strongly on Tuesday, gaining 2.85% to trade at 145.84p at 0834 GMT. However, yesterday’s losses could be a sign of things to come.
Weak aviation industry could stifle RR growth in the near term
Rolls Royce has signed some good deals this year, with the Qatar green engineering projects and the $2.6 billion US Air Force contracts taking prominence. However, the air travel industry remains a weak link in the company’s balance sheet.
Passenger numbers are still significantly below the pre-pandemic levels, and it may take a longer time before the airline industry recovers. For instance, in its Q3 report, IAG revealed that the last three months were only 43.4% of pre-pandemic numbers and an optimistic target is 60% by the end of the year.
Even if the numbers finally recover to pre-pandemic levels sometime in 2022, airlines are likely to go slow on expansion. After two years of financial hemorrhage, with billions of dollars’ worth of losses, many airlines will take time to find footing. That means that Rolls Royce engine sales could remain in the dip at least for the better part of next year.
Therefore, barring the signing of other significant long-term deals outside the commercial aviation industry, RR share price is unlikely to find strong momentum in the near term.
Technical analysis for RR share price
The RR share price momentum seems to be strengthening. The10-EMA has recently crossed above the 20-EMA. The RSI indicator is currently at 66, after previously closing at 62. The two indicators show rising bullishness. This could propel the share price marginally higher from the current price.
If the bulls sustain the upward momentum, the first resistance is likely to come at 147.44p. Beyond that point, the next resistance level is likely to be at the psychological 150p mark.
Conversely, if the buyers lose momentum, the price could head south marginally, with the first support at 143.08p and the second one at 140.58p. Beyond that point, the next support could come at 137.52, which is the six-week support level.
